Price speaks first. METI data released on 13 October put Japan's nationwide average retail kerosene price at JPY 142.40/L - already net of the emergency price-mitigation subsidy of JPY 43.0/L (the support unit price applying after 15 October 2026), and still roughly JPY 20 above a year earlier. Cold regions felt it earlier: from 1 October, Hokkaido's consumer co-op raised home-delivery prices by JPY 15/L across the prefecture, reaching about JPY 159/L in the Sapporo area, some 20% higher y/y; the Hokkaido Co-op Union submitted an urgent request to METI's regional bureau on 13 October. Alongside the price rise came order distortions: some wholesalers placed orders far above usual demand, while some primary distributors asked customers not to over-order. The government's concern is not national volume but localized demand amplification creating distribution bottlenecks.

The response is a three-part playbook. On 16 October the Minister of Economy, Trade and Industry announced three measures at a press conference: first, ask oil primary distributors, importing trading houses and wholesalers to keep sales and orders at the same monthly volumes as a year earlier, directly suppressing hoarding-type orders; second, establish a new direct kerosene sales scheme under which primary distributors sell directly when supply imbalances or distribution bottlenecks emerge; third, given that declining global refining capacity has kept imported kerosene expensive relative to crude, introduce an imported-kerosene adjustment unit price subsidizing the gap between import and domestic wholesale prices. The three measures target the order end, the distribution end and the import end respectively - dismantling the supply chain and treating each link, rather than simply handing out money.

The external backdrop deserves more attention than the domestic measures. The IEA's 14 October Oil Market Report noted that global observed oil inventories fell 95 million barrels in August, with a cumulative decline of 507 million barrels since February, and that net exports of diesel/gasoil from Gulf countries and Russia are down 1.6 million b/d versus February - gasoil tightness could persist through 2027. The EIA's 6 October Short-Term Energy Outlook projects Brent averaging $105/bbl in Q4 and expects US East Coast diesel and heating-oil inventories to run about 20% below the five-year average this winter (September was 32% below). Japan's own stockpile is not thin: Agency for Natural Resources and Energy data published in September put total oil reserves at 206 days as of end-July (103 days national + 98 days private + 4 days joint with producing countries). But reserves include crude oil; that is not the same as kerosene on retail shelves - crude must pass through refineries and ship/truck logistics to become heating oil, which is exactly why the government stresses "volume secured, supply imbalances resolved case by case." One structural fact matters: over 90% of Japan's kerosene is produced by domestic refineries, while about 40% of its naphtha is imported. Both are winter categories, but kerosene is a distribution problem and naphtha an import-dependence problem - entirely different risk profiles.

What it means for SNSUC. First, global distillate tightness (potentially through 2027 on the IEA's reading) means Japanese refiners will prioritize domestic kerosene output this winter, tightening export windows for gasoline, diesel and naphtha and supporting Asian distillate cracks - which raises the price tolerance of Japanese buyers for imported fuels and petrochemical feedstock. Second, Japan's end-user prices are partially desensitized by subsidies: with JPY 43/L of support, the retail signal is distorted, so fuel-related quotations into Japan cannot be back-solved from retail prices - they must anchor back to CFR/FOB terms. Third, kerosene ties directly into greenhouse heating and logistics diesel costs; if prices stay elevated, inflation pressure transmits into Japanese agricultural and freight costs, dampening long-term contract appetite among energy-intensive buyers. This article is market observation based on public data and does not constitute investment advice.

Author: Qiu Binbin (Shanghai New Shell Union Chemical Co., Ltd.)